Bitcoin Not Dead, Again: Washington Post Gets Schooled

Castle Island Ventures partner and cofounder of Coinmetrics.io, Nic Carter, has had quite enough. Made crazy by mainstream media misunderstanding, ignorance, and downright falsehoods regarding cryptocurrencies, he took to Medium, making the case for why Bitcoin is not dead, again.

“Bitcoin is Still a Total Disaster”

“I’m fed up with journalists who are either ignorant or unwilling to learn about cryptocurrency,” Mr. Carter began, “holding forth on its perceived weaknesses. However, there isn’t enough time in the day to rebut all of their nonsense, so I have to be selective.”

Nic Carter, partner at Castle Island Ventures, and cofounder of Coinmetrics.io, is obviously tired of journalists and their respective employers failing to understand cryptocurrency basics. The last straw, bringing his anger to a public boil, was a recent article written for The Washington Post’s Wonkblog Perspective, “Bitcoin is still a total disaster,” by Matt O’Brien. It attempts to make the case Bitcoin doesn’t work on any level, to any practical effect.

As Mr. Carter explains, Mr. O’Brien’s Wonkblog piece “relies on mistaken assumptions to paint a misleading picture of the world.” He takes the rant apart, claim by claim, beginning with whether or not bitcoin is a currency. This is a bone of contention within the community itself, so it should be noted Mr. Carter is referencing bitcoin core (BTC) and not bitcoin cash (BCH) in his arguments against the rant by Mr. O’Brien (though BTC and BCH carry similarities).

Mr. O’Brien’s first claim, first sentence really, is BTC’s lack of price stability, and thus this fact discounts it as a currency. Interestingly, and for reasons cited just above, Mr. Carter almost concedes the point, “This assumes that Bitcoin is a currency, and that the definition of currency is normative (‘x should do y’) as opposed to descriptive (‘things of type x have the qualities y and z’). I’d classify Bitcoin the protocol as a complete monetary system, and bitcoin the unit of value as a commodity money, which has the potential to become a gold-like reserve currency. Commodities fluctuate — that’s what they do.” Maybe BTC is more than one thing, seems to be Mr. Carter’s nuanced stance.

Journalists Do Not Understand Decentralization

Another assertion in the Washington Post rant had to do with volatility being baked-in to Bitcoin. Mr. Carter describes that accusation as “an odd rewrite of history, or more charitably, a very strange interpretation of bitcoin’s purpose. The impossible trinity tells that it’s impossible to have free capital flow, sovereign monetary policy, and a fixed exchange rate all at the same time. Bitcoin was designed with sovereign monetary policy and a free flow of capital. No one underwrites or backs Bitcoin, so it cannot be pegged to a real-world basket of goods. That’s the same with gold. Both have emergent monetary premia. This can’t be planned for — it just so happened that way. Needless to say, Satoshi didn’t design Bitcoin to be unstable, he wanted to solve the problem of double spends with digital cash such that it didn’t rely on a single validator. Its volatility is an emergent property, not a design objective.”

Mr. O’Brien also attempts to use BTC being decentralized as a bug rather than a feature. He writes in the Washington Post that “the only way to [validate transactions in such a scheme] would be for every member of that network to keep a record of every bitcoin transaction there had ever been — that way they knew who had bitcoin to spend — which would require a lot of computing power,” emphasis his.

“This is a common misconception,” Mr. Carter answers, bent on correction. “PoW and mining ensures that the network deterministically converges to a shared history, without any subjectivity or off-chain coordination. The fact that the minted units have value means that miners are incentivized to behave appropriately in the short and medium term. And the fact that those units are worth $x means that miners will pay anything up to $x to obtain them. This is the source of the large quantities of computing power allocated to the network — the combination of efficient mining hardware and large amounts of value at stake.” Furthermore, the Post journalist confuses running nodes with mining, and with miners. Maintaining the ledger, as it were, is a bandwidth issue, a storage issue, and has nothing to do with mining.

The remainder of Nic Carter’s takedown of the Post reads similarly, and is worth a look. He tackles the issue of price manipulation by castigating, “Plain old manipulation? You really mean to tell me you think a $100b network was manipulated into existence?” As for its falling prey to the wealth effect, Mr. Carter counters with empirical data leading to how Bitcoin “is unique among monetary assets because it offers properties not instantiated by gold or the USD. There’s a reason people choose Bitcoin.” He also isn’t afraid to get financially technical, but ultimately finds, “The problem with this article is that the pundit in question has settled on a narrative — Bitcoin is a poor economic system — and then searched for various data points that confirm his view. Bitcoin is volatile, yes. It is an emerging commodity-money that is becoming financialized and growing from a small tribe of enthusiasts to a global user base. Of course it’s volatile. Growth is not linear. Only ‘fragilistas’ demand it to be so.”